How To Use The Business Model Canvas More Effectively

How To Use The Business Model Canvas More Effectively

The lean startup methodology has elucidated that to innovate fast you have to learn fast what problem it is you’re trying to solve and what solution customers are willing to pay for. Speed is the comparative advantage of successful companies. So before you start building something nobody needs you should build MVP, measure and learn fast by applying continuous deployment, split testing etc.

But before you build your MVP you should develop your business model and test it. The best tools out there to test your business model are the Business Model Canvas (BMC) and Value Proposition Canvas (VPC). Both tools are introduced to the world by Alex Osterwalder. In an upcoming article we will introduce the Value Proposition Canvas.

The BMC lets you look at all the important building blocks of your business in one page. Each component of the BMC contains a series of hypotheses that you need to test. The idea is to put them on paper and start testing right away.

So how do you use the BMC more effectively?

Test, iterate, learn

Build a minimal viable business model canvas or MVBMC

Prevent GIGO

Don’t forget

1 Sketch, Test, Iterate, Learn

The core idea of using the BMC is that everything you think about your business is a hypothesis. You only know if these assumptions are true until you validated them. So instead of writing lengthy business plans you should start sketching out the BMC and start getting feedback from customers immediately. As Osterwalder says in this [video] using the BMC without testing is the business plan of the 21st century. Osterwalder argues that the things you put on the canvas are assumptions, so you don’t know if they are going to work. The idea is to test them very rapidly.

2 Build a minimal viable business model canvas

The bedrock of lean startup thinking is to learn fast. This is done by building a MVP, testing it and taking those tests results as an input on how to improve your product or service. The idea of building a MVP is to prevent wasting time on things that you think are important, but are in fact unnecessary or plain out bad for your value proposition. The same thinking also applies to the application of the BMC. In practice this means sketching out the BMC fast and start testing it. So what does a minimal viable BMC mean exactly? It means that if you have no idea about what your cost structure or distribution channels might be from the outset, it’s not a problem. If in practice this means you have only filled out 5 of the 9 building blocks of the BMC it’s okay. The feedback received from customers, partners and other stakeholders will enable you to fill in the other elements.

3 Prevent GIGO

Like in any form of communication it’s very important to be accurate and specific. For instance when you’re writing down your value proposition. Or through which channels do your customers want to be reached.

It’s important to be accurate and specific, because the goal is to get clear actionable feedback. If the data you use when developing your BMC doesn’t make sense you can be sure that the output is unclear too. This might result in the highly negative consequence of building things that nobody wants or cares about. In other words beware of GIGO (Garbage in, garbage out)!

4 Don’t forget

Don’t forget to use the BMC during whole process of building your startup, especially when you’re still building your MVP. By regularly consulting your BMC during the product development process you can check whether you’re right on track. But there is also a feedback loop here: by going back and forth you can improve your BMC along the way. During the product development process, shipping it, etc, you will collect a ton of information. Information that will definitely enable you to improve your BM(C).

For a short introduction on the BMC see the video below.

Do you want to know more about The Business Model Canvas? Samir can help you out!